I.

The Nature of Sale Reciprocal obligations are “those which arise from the same cause, and in which each party is a debtor
and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other.
A. Definition They are to be performed simultaneously such that the performance of one is conditioned upon the
simultaneous fulfillment of the other.
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to
deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. Art. 1169. Those obliged to deliver or to do something incur in delay from the time the
A contract of sale may be absolute or conditional. obligee judicially or extrajudicially demands from them the fulfillment of their obligation.

1. Elements of Sale However, the demand by the creditor shall not be necessary in order that delay may exist:
(a) CONSENT, or meeting of the minds to transfer ownership in exchange for the price; 

(1) When the obligation or the law expressly so declare; or
(b) SUBJECT MATTER; and 
 (2) When from the nature and the circumstances of the obligation it appears that
the designation of the time when the thing is to be delivered or the service is to be rendered
(c) PRICE, certain in money or its equivalent. 

was a controlling motive for the establishment of the contract; or
2. Stages of Contract of Sale (3) When demand would be useless, as when the obligor has rendered it beyond
(a) POLICITACION, negotiation, or preparation stage; 
 his power to perform.
(b) PERFECTION, conception or “birth”; and 

In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to
(c) CONSUMMATION or “death.” 
 comply in a proper manner with what is incumbent upon him. From the moment one of the parties
fulfills his obligation, delay by the other begins.
3. Sales Creates Real Obligation “To Give”
Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors
Art. 1165. When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him by should not comply with what is incumbent upon him.
Article 1170, may compel the debtor to make the delivery.
The injured party may choose between the fulfillment and the rescission of the obligation, with the
If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor. payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if
the latter should become impossible.
If the obligor delays, or has promised to deliver the same thing to two or more persons who do not have the same
interest, he shall be responsible for any fortuitous event until he has effected the delivery. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.

This is understood to be without prejudice to the rights of third persons who have acquired the thing,
4. Essential Characteristics of Sale in accordance with Articles 1385 and 1388 and the Mortgage Law.
a. Nominate and Principal d. Onerous
Sale is a nominate contract since it has been given a particular name by law. Its nature and consequences Sale is an onerous contract because it imposes a valuable consideration as a prestation, which ideally is a
are governed by a set of rules, Law on Sales. price certain in money or its equivalent.
Sale is a principal contract because it can stand on its own, and does not depend on another contract for e. Commutative
its validity or existence. More importantly, parties enter into sale to achieve within its essence the
objectives of the transaction, and simply not in preparation for another contract. Sale is a commutative contract, as distinguished from an aleatory contract, because a thing of value is
exchanged for equal value, i.e., ideally the value of the subject matter is equivalent to the price paid.
b. Consensual Nevertheless, there is no requirement that the price be equal to the exact value of the subject matter; all
Sale is consensual contract since it is perfected by mere consent, at the moment there is a meeting of the that is required is for the seller to believe that what was received was of the commutative value of what
minds upon which the thing which is the object of the contract and upon the proce. he gave.
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon f. Sale is a Title and Not Mode
the thing which is the object of the contract and upon the price.
The perfection of a sale gives rise to the obligation on the part of the seller to transfer
From that moment, the parties may reciprocally demand performance, subject to the ownership and deliver possession of the subject matter; nevertheless, it would be delivery or tradition that
provisions of the law governing the form of contracts. is the mode to transfer ownership and possession to the buyer. Sale is merely title that creates the obligation
on the part of the seller to transfer ownership and deliver possession, but on its own sale is not a mode
c. Bilateral and Reciprocal that transfers ownership.
Sale is a bilateral contract embodying reciprocal obligations because it imposes obligations on both
parties to the relationship, and whereby the obligation or promise of each party is the cause or Mode is the legal means by which dominion or ownership is created, transferred or destroyed
consideration for the obligation or promise of the other. (e.g., succession, donation, discovery, intellectual creation, etc.); title only constitutes the legal basis by
which to affect dominion or ownership. Therefore, sale by itself does not transfer or affect ownership;
 the most that sale does is to create the obligation to transfer ownership; it is tradition or delivery, as a
consequence of sale, that actually transfers ownership. Two tests for distinction:
(a) Manufacturing in the ordinary course of business to cover sales contracts; and 

B. Sale Distinguished from Similar Contracts
(b) Manufacturing upon special order of customers, to cover contracts for piece-of-work. 

1. Donation
Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another person, Main distinguishing factor between a sale and a contract for a piece-of-work is the essence of why the parties enter
who accepts it. Sale is essentially an onerous contract, whereas donation is a gratuitous contract. A sale is perfected into it: if the essence is the object, irrespective of the party giving or executing it, the contract is sale; if the essence
by mere consent, whereas donation, being a solemn contract, although consent is also required, must comply with is the service, knowledge or even reputation of the person who executes or manufactures the object, the contract is
the formalities mandated by law for its validity. for piece of work, which is essentially the sale of service or labor.

When the disposition is for valuable consideration, there is no diminution of the estate but merely substitution of Sale is constituted of real obligations and would be the proper subject of an action for specific performance. On the
values, that is, the property sold is replaced by the equivalent monetary consideration. other hand, a contract for a piece-of-work, where the main subject matter is the service to be rendered (obligation
to do), would not allow an action for specific performance in case the contractor refuses to comply with his
Art. 1471. If the price is simulated, the sale is void, but the act may be shown to have been in reality a obligation.
donation, or some other act or contract.
Art. 1467. A contract for the delivery at a certain price of an article which the vendor in the ordinary
Art. 725 Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in course of his business manufactures or procures for the general market, whether the same is on hand at the time or
favor of another, who accepts it. not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special
order, and not for the general market, it is a contract for a piece of work.
2. Barter
By barter or exchange, one of the parties binds himself to give one thing in consideration of the other’s promise to The proper application of the “upon special order” test under Article 1467, as not merely one of timing of the flow
give another thing; whereas, by sale, one of the parties binds himself to deliver a thing in consideration of the other’s of the transactions, but one that goes into the nature of the product involved when it was possible for the
undertaking to pay the price in money or its equivalent. manufacturer or producer to be able to produce the product ahead of any special order given by a customer or client

It is critical to know difference between sale and barter for two reasons. Firstly, the rules on the Statute of Frauds,91 Art. 1713. By the contract for a piece of work the contractor binds himself to execute a piece of work
which apply to the sale of real property, and personal property bought at 5500.00 or more, do not apply to barter. for the employer, in consideration of a certain price or compensation. The contractor may either employ only his
Secondly, the right of legal redemption granted by law to an adjoining owner of an urban land,92 covers only “resale” labor or skill, or also furnish the material.
and does not cover exchanges of properties.
Art. 1714. If the contractor agrees to produce the work from material furnished by him, he shall deliver
Art. 1468. If the consideration of the contract consists partly in money, and partly in another thing, the the thing produced to the employer and transfer dominion over the thing. This contract shall be governed by the
transaction shall be characterized by the manifest intention of the parties. If such intention does not clearly appear, following articles as well as by the pertinent provisions on warranty of title and against hidden defects and the
it shall be considered a barter if the value of the thing given as a part of the consideration exceeds the amount of the payment of price in a contract of sale.
money or its equivalent; otherwise, it is a sale.
Art. 1715. The contract shall execute the work in such a manner that it has the qualities agreed upon and
Art. 1638. By the contract of barter or exchange one of the parties binds himself to give one thing in has no defects which destroy or lessen its value or fitness for its ordinary or stipulated use. Should the work be not
consideration of the other's promise to give another thing. of such quality, the employer may require that the contractor remove the defect or execute another work. If the
contract fails or refuses to comply with this obligation, the employer may have the defect removed or another work
Art. 1639. If one of the contracting parties, having received the thing promised him in barter, should executed, at the contractor's cost.
prove that it did not belong to the person who gave it, he cannot be compelled to deliver that which he offered in
exchange, but he shall be entitled to damages.
4. Agency to Sell
Art. 1640. One who loses by eviction the thing received in barter may recover that which he gave in By the contract of agency, a person binds himself to render some service or to do something in representation or
exchange with a right to damages, or he may only demand an indemnity for damages. However, he can only make on behalf of the principal, with the consent or authority of the latter.
use of the right to recover the thing which he has delivered while the same remains in the possession of the other
party, and without prejudice to the rights acquired in good faith in the meantime by a third person. A contract of agency is one that essentially establishes a representative capacity in the person of the agent on behalf
of the principal, and one characterized as highly fiduciary. Involving obligations to do (i.e., to represent the principal),
Art. 1641. As to all matters not specifically provided for in this Title, barter shall be governed by the contracts of agency to sell or to buy are essentially different from sales.
provisions of the preceding Title relating to sales.
Sale is not unilaterally revocable; whereas, a contract of agency to sell, because it covers an underlying fiduciary
3. Contract for Piece-of-Work relationship, is essentially revocable,113 even in the presence of an irrevocability clause.
By the contract for a piece-of-work, the contractor binds himself to execute a piece of work for the employer, in
consideration of a certain price or compensation; the contractor may either employ only his labor or skill, or also In sale, the buyer himself pays for the price of the object, which constitutes his main obligation; in an agency to sell,
furnish the material. the agent is not obliged to pay the price, and is merely obliged to deliver the price which he may receive from the
Whether the contract be one of sale or one for a piece of work, a transfer of ownership is involved and a party buyer.
necessarily walks away with an object. Whether the thing transferred is one not in existence and which never would
have existed but for the order of the party desiring to acquire it, or a thing which would have existed and been the In sale, the buyer, after delivery, becomes the owner of the subject matter; in an agency to buy, the agent does not
subject of sale to some other person, even if the order had not been given. become the owner of the thing subject of the agency, even if the object is delivered to him.
 Art. 1489. All persons who are authorized in this Code to obligate themselves, may enter into a contract
In sale, the seller warrants; in an agency, the agent who effects the sale assumes no personal liability as long as he of sale, saving the modifications contained in the following articles.
acts within his authority and in the name of the principal. Where necessaries are those sold and delivered to a minor or other person without capacity
to act, he must pay a reasonable price therefor. Necessaries are those referred to in Article 290.
In an agency to sell, the agent is disqualified from receiving any personal profit from the transaction covered by the
agency, and any profit received should pertain to the principal Minors, Insane, Demented Persons, Deaf-Mutes

Unlike a sale contract which must comply with the Statute of Frauds for enforceability, a contract of agency to sell Art. 1327. The following cannot give consent to a contract:
is valid and enforceable in whatever form it may be entered into. (1) Unemancipated minors;
(2) Insane or demented persons, and deaf-mutes who do not know how to write.
By way of exception, under Article 1874 of the Civil Code, when the sale of a piece of land or any interest therein is
through an agent, the authority of the latter shall be in writing, otherwise, the sale shall be void. Art. 1397. The action for the annulment of contracts may be instituted by all who are thereby obliged principally or
subsidiarily. However, persons who are capable cannot allege the incapacity of those with whom they contracted;
Art. 1466. In construing a contract containing provisions characteristic of both the contract of sale and of the nor can those who exerted intimidation, violence, or undue influence, or employed fraud, or caused mistake base
contract of agency to sell, the essential clauses of the whole instrument shall be considered their action upon these flaws of the contract.

Art. 1399. When the defect of the contract consists in the incapacity of one of the parties, the incapacitated person
5. Dacion En Pago is not obliged to make any restitution except insofar as he has been benefited by the thing or price received by him.
Dation in payment is one whereby property is alienated to the creditor in full satisfaction of a debt in money;133 it
constitutes “the delivery and transmission of a thing by the debtor to the creditor as an accepted equivalent of the Sales by and Between Spouses
performance of the obligation.
a. With Third Persons:
Dacion en pago considerations are not in the realm of perfection of contract, but rather in the stage of consummation, Art. 73. Either spouse may exercise any legitimate profession, occupation, business or activity without
for indeed dacion en pago is by definition a special mode of payment, whereby the debtor offers another thing to the the consent of the other. The latter may object only on valid, serious, and moral grounds.
creditor who accepts it as equivalent of payment of an outstanding debt. In case of disagreement, the court shall decide whether or not:
(1) The objection is proper; and
The legal effects of a dacion en pago come into effect only when both the debtor and creditor agree to the terms (2) Benefit has occurred to the family prior to the objection or thereafter. If the benefit
thereof, for consent to dacion is an essential element. But once the creditor agrees to a dacion, it ought to know, accrued prior to the objection, the resulting obligation shall be enforced against the separate
especially when it is a bank, and must abide by the legal consequence thereof; that the pre-existing obligation is property of the spouse who has not obtained consent.
thereby extinguished. The foregoing provisions shall not prejudice the rights of creditors who acted in good faith.

Art. 1245. Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall Art. 96. The administration and enjoyment of the community property shall belong to both spouses
be governed by the law of sales. jointly. In case of disagreement, the husband's decision shall prevail, subject to recourse to the court by
the wife for proper remedy, which must be availed of within five years from the date of the contract
Art. 1934. An accepted promise to deliver something by way of commodatum or simple loan is binding upon parties, implementing such decision.
but the commodatum or simple loan itself shall not be perfected until the delivery of the object of the contract. In the event that one spouse is incapacitated or otherwise unable to participate in the
administration of the common properties, the other spouse may assume sole powers of administration.
6. Lease These powers do not include disposition or encumbrance without authority of the court or the written
In a contract of lease, the lessor binds himself to give to another (the lessee) the enjoyment or use of a thing for a consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance
price certain, and for a period which may be definite or indefinite. It may be stipulated in such contract that the shall be void. However, the transaction shall be construed as a continuing offer on the part of the
lessee has the option to buy the leased property for a small consideration at the end of the term of the lease, provided consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance
that the rent has been duly paid; or if the rent throughout the term had been paid, title shall vest in the lessee. Such by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors.
contract are really conditional sales and are deemed leases in name only.
Art. 124. The administration and enjoyment of the conjugal partnership shall belong to both spouses
Art. 1484. In a contract of sale of personal property the price of which is payable in installments, the jointly. In case of disagreement, the husband's decision shall prevail, subject to recourse to the court by
vendor may exercise any of the following remedies: the wife for proper remedy, which must be availed of within five years from the date of the contract
(1) Exact fulfillment of the obligation, should the vendee fail to pay; implementing such decision.
(2) Cancel the sale, should the vendee's failure to pay cover two or more installments; In the event that one spouse is incapacitated or otherwise unable to participate in the
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's administration of the conjugal properties, the other spouse may assume sole powers of administration.
failure to pay cover two or more installments. In this case, he shall have no further action against the These powers do not include disposition or encumbrance without authority of the court or the written
purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance
shall be void. However, the transaction shall be construed as a continuing offer on the part of the
Art. 1485. The preceding article shall be applied to contracts purporting to be leases of personal property consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance
with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing. by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors.

II. PARTIES TO A CONTRACT b. Between Spouses

General Rule:
Art. 133. From the common mass of property support shall be given to the surviving spouse and to the children Art. 1348. Impossible things or services cannot be the object of contracts.
during the liquidation of the inventoried property and until what belongs to them is delivered; but from this shall be
deducted that amount received for support which exceeds the fruits or rents pertaining to them. Art. 1462. The goods which form the subject of a contract of sale may be either existing goods, owned or possessed
by the seller, or goods to be manufactured, raised, or acquired by the seller after the perfection of the contract of
Art. 1490. The husband and the wife cannot sell property to each other, except: sale, in this Title called "future goods."
(1) When a separation of property was agreed upon in the marriage settlements; or
(2) When there has been a judicial separation or property under Article 191. There may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency which may
or may not happen.
Art. 1492. The prohibitions in the two preceding articles are applicable to sales in legal redemption, compromises
and renunciations. a. Emptio Rei Speratae - a contract covering future things, and subject to a suspensive condition that the
subject matter will come into existence; covers only contracts of sale whose subject matter are
Art. 87. Every donation or grant of gratuitous advantage, direct or indirect, between the spouses during the marriage determinate or specific, and has no application to determinable generic things since the condition that
shall be void, except moderate gifts which the spouses may give each other on the occasion of any family rejoicing. they must come into existence is wholly irrelevant, for generic subject matters are never lost.
The prohibition shall also apply to persons living together as husband and wife without a valid marriage.
Art. 1461. Things having a potential existence may be the object of the contract of sale.
SPECIFIC INCAPACITY MANDATED BY LAW The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing
Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person will come into existence.
or through the mediation of another:
(1) The guardian, the property of the person or persons who may be under his guardianship; The sale of a vain hope or expectancy is void.
(2) Agents, the property whose administration or sale may have been entrusted to them, unless the
consent of the principal has been given; Art. 1347. All things which are not outside the commerce of men, including future things, may be the
(3) Executors and administrators, the property of the estate under administration; object of a contract. All rights which are not intransmissible may also be the object of contracts.
(4) Public officers and employees, the property of the State or of any subdivision thereof, or of any No contract may be entered into upon future inheritance except in cases expressly authorized by law.
government-owned or controlled corporation, or institution, the administration of which has been All services which are not contrary to law, morals, good customs, public order or public policy may
intrusted to them; this provision shall apply to judges and government experts who, in any manner likewise be the object of a contract.
whatsoever, take part in the sale;
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and b. Emptio Spei
employees connected with the administration of justice, the property and rights in litigation or levied Art. 1461. Things having a potential existence may be the object of the contract of sale.
upon an execution before the court within whose jurisdiction or territory they exercise their respective The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing
functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with will come into existence.
respect to the property and rights which may be the object of any litigation in which they may take part
by virtue of their profession. The sale of a vain hope or expectancy is void.
(6) Any others specially disqualified by law.
c. Subject to Resolutory Condition
Art. 1492. The prohibitions in the two preceding articles are applicable to sales in legal redemption, compromises Art. 1465. Things subject to a resolutory condition may be the object of the contract of sale.
and renunciations.
2. Must be Licit
III. SUBJECT MATTER When the subject matter is illicit, the resulting contract of sale is void.
Requisites:
(a) It must be existing, having potential existence, a future thing, or even contingent4 or subject to a Art. 1347. All things which are not outside the commerce of men, including future things, may be the object of a
resolutory condition; in other words, it must be a “POSSIBLE THING;” 
 contract. All rights which are not intransmissible may also be the object of contracts.
No contract may be entered into upon future inheritance except in cases expressly authorized by law.
(b) It must be LICIT; and 
 All services which are not contrary to law, morals, good customs, public order or public policy may likewise be the
object of a contract.
(c) It must be DETERMINATE or at least 
 DETERMINABLE. 

Art. 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it
1. Must be existing, future or contingent is delivered.
Under Article 1459 of the Civil Code, it is only required that the seller “must have a right to transfer the ownership Art. 1575. The sale of animals suffering from contagious diseases shall be void.
thereof at the time [the subject matter] is delivered.” The rule supports the principle that a sale constitutes merely a A contract of sale of animals shall also be void if the use or service for which they are acquired has been stated in
title and not a mode, and its perfection does not per se affect the title or ownership over the subject matter thereof. the contract, and they are found to be unfit therefor.
Art. 1347. All things which are not outside the commerce of men, including future things, may be the object of a 3. Must be Determinable or At Least “Determinable”
contract. All rights which are not intransmissible may also be the object of contracts. Requisites:
No contract may be entered into upon future inheritance except in cases expressly authorized by law. (a) If at perfection of the sale, the subject matter is capable of being made determinate (the “capacity to
All services which are not contrary to law, morals, good customs, public order or public policy may likewise be the
object of a contract. segregate” test); and 

 (b) Without the necessity of a new or further agreement between the parties (the “no further agreement” buyer by operation of law, provided there has been previous delivery of the subject matter by the seller to the buyer.
test). 
 It should be noted that for the transfer of ownership ipso jure to happen under Article 1434, it is essential that there
not only exist a valid sale, but that previous physical delivery of the subject matter must have been done.
Art. 1460. A thing is determinate when it is particularly designated or physical segregated from all other of the same
Art. 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it
class.
is delivered.
The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing is capable of
being made determinate without the necessity of a new or further agreement between the parties.
Art. 1462. The goods which form the subject of a contract of sale may be either existing goods, owned or possessed
by the seller, or goods to be manufactured, raised, or acquired by the seller after the perfection of the contract of
The requisite of being “determinable” is met when at perfection, the agreement between the parties included a
sale, in this Title called "future goods."
formula which can be used by the courts to establish the subject matter upon which the obligation to deliver can be
There may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency which may
enforced, without needing to get back to any one or both the parties of the object of their intention.
or may not happen.
a. Generic things may be object of sale
Art. 1505. Subject to the provisions of this Title, where goods are sold by a person who is not the owner thereof,
Art. 1246. When the obligation consists in the delivery of an indeterminate or generic thing, whose
and who does not sell them under authority or with the consent of the owner, the buyer acquires no better title to
quality and circumstances have not been stated, the creditor cannot demand a thing of superior quality.
the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller's
Neither can the debtor deliver a thing of inferior quality. The purpose of the obligation and other
authority to sell.
circumstances shall be taken into consideration.
Nothing in this Title, however, shall affect:
(1) The provisions of any factors' act, recording laws, or any other provision of law enabling the apparent owner of
Art. 1409. The following contracts are inexistent and void from the beginning:
goods to dispose of them as if he were the true owner thereof;
xxx
(2) The validity of any contract of sale under statutory power of sale or under the order of a court of competent
(6) Those where the intention of the parties relative to the principal object of the contract cannot be
jurisdiction;
ascertained;
(3) Purchases made in a merchant's store, or in fairs, or markets, in accordance with the Code of Commerce and
special laws.
b. Undivided Interest or Undivided Share in a Mass of Fungible Goods
Art. 1463. The sole owner of a thing may sell an undivided interest therein.
6. Illegality of Subject Matter
Art. 1409. The following contracts are inexistent and void from the beginning:
Art. 1464. In the case of fungible goods, there may be a sale of an undivided share of a specific mass,
(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or
though the seller purports to sell and the buyer to buy a definite number, weight or measure of the goods
public policy;
in the mass, and though the number, weight or measure of the goods in the mass is undetermined. By
(2) Those which are absolutely simulated or fictitious;
such a sale the buyer becomes owner in common of such a share of the mass as the number, weight or
(3) Those whose cause or object did not exist at the time of the transaction;
measure bought bears to the number, weight or measure of the mass. If the mass contains less than the
(4) Those whose object is outside the commerce of men;
number, weight or measure bought, the buyer becomes the owner of the whole mass and the seller is
(5) Those which contemplate an impossible service;
bound to make good the deficiency from goods of the same kind and quality, unless a contrary intent
(6) Those where the intention of the parties relative to the principal object of the contract cannot be
appears.
ascertained;
(7) Those expressly prohibited or declared void by law.
4. Quantity of Subject Matter not Essential for Perfection
These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.
The meeting of minds on the quantity of the goods as subject matter is necessary for the validity of the sale, because
such aspect go into the very core of such contract embodying the essential characteristic of mutuality or obligatory force.
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to
However, the controlling doctrine in National Grains Authority is that specific quantity of the subject matter is not
deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.
important when it is still possible to determine the quantity “without the need of a new contract between the parties,”
A contract of sale may be absolute or conditional.
and therefore complies with the requisite of being determinable.
Art. 1461. Things having a potential existence may be the object of the contract of sale.
Art. 1349. The object of every contract must be determinate as to its kind. The fact that the quantity is not
The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will come
determinate shall not be an obstacle to the existence of the contract, provided it is possible to determine the same,
into existence.
without the need of a new contract between the parties.
The sale of a vain hope or expectancy is void.
5. Seller’s Obligation to Transfer Title to Buyer
Art. 1462. The goods which form the subject of a contract of sale may be either existing goods, owned or possessed
In general, a perfected contract of sale cannot be challenged on the ground that seller had no ownership of the thing
by the seller, or goods to be manufactured, raised, or acquired by the seller after the perfection of the contract of
sold at the time of perfection.
sale, in this Title called "future goods."
Although the seller must be the owner of the thing in order to transfer ownership to the buyer, he need not be the
There may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency which may
owner thereof at the time of perfection; it is sufficient that he be the owner at the time of the delivery.
or may not happen.
Exception: in case of judicial sale
Art. 1575. The sale of animals suffering from contagious diseases shall be void.
A contract of sale of animals shall also be void if the use or service for which they are acquired has been stated in
Subsequent Acquisition of Title by Seller
the contract, and they are found to be unfit therefor.
Article 1434 of the Civil Code provides that when at the time of perfection, the seller sells a subject matter over
which he is not the owner, the subsequent acquisition of title by a seller validates the sale and title passes to the
IV. PRICE AND OTHER CONSIDERATION
Price - the sum stipulated as the equivalent of the thing sold and also every incident taken into consideration for the
fixing of the price put to the debit of the buyer and agreed to by him. a. How Price Determined to be Ascertainable
1. Set by third person appointed at perfection - valid
Requisites: 2. Set by the courts
1. Real 3. By reference to a definite day, particular exchange or market
2. Money or its equivalent (valuable consideration) Art. 1472. The price of securities, grain, liquids, and other things shall also be
3. Certain or ascertainable considered certain, when the price fixed is that which the thing sold would have
on a definite day, or in a particular exchange or market, or when an amount is
1. Price Must be Real fixed above or below the price on such day, or in such exchange or market,
Price is “real” when at the perfection of the sale, there is legal intention on the part of the buyer to pay the price, provided said amount be certain.
and legal expectation on the part of the seller to receive such price as the value of the subject matter he obligates 4. By reference to another thing certain
himself to deliver.
b. Price Never Set by One or Both Parties
Art. 1471. If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or
some other act or contract. Art. 1473. The fixing of the price can never be left to the discretion of one of the contracting parties.
However, if the price fixed by one of the parties is accepted by the other, the sale is perfected.
a. When Price “Simulated”
When the price is simulated because neither party to the Deed of Sale had any intention whatsoever that Art. 1182. When the fulfillment of the condition depends upon the sole will of the debtor, the conditional
the amount will be paid, the sale is void. An absolutely simulated contract is void, and the parties may obligation shall be void. If it depends upon chance or upon the will of a third person, the obligation shall
recover from each other what they may have given under the ‘contract. take effect in conformity with the provisions of this Code.

b. When Price is “False” c. Effects of Un-ascertainability

Price is “false” when there is a real price upon which the minds of the parties had met, but not declared,
and what is stated in the covering deed is not the one intended to be paid. 4. Manner of Payment of Price Essential
Essential ingredient before a valid and binding contract of sale can be said to exist, since it is part of the prestation
If the price indicated in the covering instrument is false, the contract of sale is valid, but the underyling of the contract,75 and without which there can be no valid sale,76 nor can an action for specific performance be
deed is subject to reformation to indicate the real price upon which the minds of the parties have met. made against the alleged seller.77 Manner of payment of the price goes into the essence of what makes price certain
or ascertainable.
Art. 1353. The statement of a false cause in contracts shall render them void, if it should not be proved
that they were founded upon another cause which is true and lawful. Art. 1179. Every obligation whose performance does not depend upon a future or uncertain event, or upon a past
event unknown to the parties, is demandable at once.
Art. 1354. Although the cause is not stated in the contract, it is presumed that it exists and is lawful, Every obligation which contains a resolutory condition shall also be demandable, without prejudice to the effects of
unless the debtor proves the contrary. the happening of the event.

c. Non-payment of Price 5. Inadequacy of Price does not Affect Ordinary Sale

The failure to pay the price does not cancel a sale for lack of consideration, for there is still consideration. The test for its “commutativeness” is met when parties believe honestly that they received good value for what they
The failure to pay a real price goes not into perfection of the sale but into its consummation. Non- have given up in exchange.
payment of the price is a cause either for specific performance or for rescission. Gross inadequacy of price by itself will not result in a void contract, and it does not even affect the validity of a
contract of sale, unless it signifies a defect in the consent or that the parties actually intended a donation or some
2. Must be in Money or its Equivalent other contract.
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to
deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there
A contract of sale may be absolute or conditional. has been fraud, mistake or undue influence.

Art. 1468. If the consideration of the contract consists partly in money, and partly in another thing, the transaction Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as it may indicate a defect in the
shall be characterized by the manifest intention of the parties. If such intention does not clearly appear, it shall be consent, or that the parties really intended a donation or some other act or contract.
considered a barter if the value of the thing given as a part of the consideration exceeds the amount of the money
or its equivalent; otherwise, it is a sale. a. Gross Inadequacy of Price Money May Avoid Judicial Sale
It is because the contract of sale is not the result of negotiations and bargaining
3. Must be Certain or Ascertainable at Perfection
Art. 1469. In order that the price may be considered certain, it shall be sufficient that it be so with reference to b. Lesion of more than ¼ of value of thing makes sale rescissible unless approved by court
another thing certain, or that the determination thereof be left to the judgment of a special person or persons. Art. 1386. Rescission referred to in Nos. 1 and 2 of Article 1381 shall not take place with
Should such person or persons be unable or unwilling to fix it, the contract shall be inefficacious, unless the parties respect to contracts approved by the courts.
subsequently agree upon the price.
If the third person or persons acted in bad faith or by mistake, the courts may fix the price. c. Gross inadequacy of price may be raise the presumption of equitable mortgage
Where such third person or persons are prevented from fixing the price or terms by fault of the seller or the buyer, The proper remedy of the alleged seller, who is actually an equitable mortgagor, is not to rescind the
the party not in fault may have such remedies against the party in fault as are allowed the seller or the buyer, as the contract of sale, but to have it reformed or declared a mortgage contract, and to pay off the indebtedness
case may be. which is secured.
 as description, it is not sufficient that the bulk of goods correspond with the sample if they do not also correspond
Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the with the description.
following cases: The buyer shall have a reasonable opportunity of comparing the bulk with the description or the sample.
(1) When the price of a sale with right to repurchase is unusually inadequate;
Art. 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as
V. FORMATION OF CONTRACT OF SALE proof of the perfection of the contract.

(a) POLICITACION, negotiation, preparation, conception or generation stage, which is the period of Art. 1483. Subject to the provisions of the Statute of Frauds and of any other applicable statute, a contract of sale
negotiation and bargaining, ending at the moment of perfection; 
 may be made in writing, or by word of mouth, or partly in writing and partly by word of mouth, or may be inferred
from the conduct of the parties.
(b) PERFECTION or “birth” of the contract, which is the point in time when the parties come to agree
on the terms of the sale; and 
 Art. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may
(c) CONSUMMATION or “death” of the contract, which is process of fulfillment or performance of exercise any of the following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
the terms agreed upon in the contract. 

(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the failure to pay cover two or more installments. In this case, he shall have no further action against the
object of the contract and upon the price. purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void.
From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing
the form of contracts. Art. 1485. The preceding article shall be applied to contracts purporting to be leases of personal property with option
to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing.
Art. 1476. In the case of a sale by auction:
(1) Where goods are put up for sale by auction in lots, each lot is the subject of a separate contract of Art. 1486. In the case referred to in two preceding articles, a stipulation that the installments or rents paid shall not
sale. be returned to the vendee or lessee shall be valid insofar as the same may not be unconscionable under the
(2) A sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer, circumstances.
or in other customary manner. Until such announcement is made, any bidder may retract his bid; and
the auctioneer may withdraw the goods from the sale unless the auction has been announced to be Art. 1487. The expenses for the execution and registration of the sale shall be borne by the vendor, unless there is a
without reserve. stipulation to the contrary.
(3) A right to bid may be reserved expressly by or on behalf of the seller, unless otherwise provided by
law or by stipulation. Art. 1488. The expropriation of property for public use is governed by special laws.
(4) Where notice has not been given that a sale by auction is subject to a right to bid on behalf of the
seller, it shall not be lawful for the seller to bid himself or to employ or induce any person to bid at such A. Policitacion Stage
sale on his behalf or for the auctioneer, to employ or induce any person to bid at such sale on behalf of Policitacion, or unaccepted unilateral promise to buy or to sell, prior to acceptance, does not give rise to any obligation
the seller or knowingly to take any bid from the seller or any person employed by him. Any sale or right,5 and creates no privity between the purported seller (offeror) and buyer (offerees).
contravening this rule may be treated as fraudulent by the buyer.
At policitation stage, there is “freedom to contract,” which signifies the right to choose with whom to contract and what
Art. 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery to contract
thereof.
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
Art. 1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor
the price. if the promise is supported by a consideration distinct from the price.
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. 1. Option Contract
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor An option is a preparatory contract in which one party grants to the other, for a fixed period and under
if the promise is supported by a consideration distinct from the price. (1451a) specified conditions, the power to decide, whether or not to enter into a principal contract. It binds the
party who has given the option, not to enter into the principal contract with any other person during the
Art. 1480. Any injury to or benefit from the thing sold, after the contract has been perfected, from the moment of period designated, and, within that period, to enter into such contract with the one to whom the option
the perfection of the contract to the time of delivery, shall be governed by Articles 1163 to 1165, and 1262. was granted, if the latter should decide to use the option. It is a separate agreement distinct from the
This rule shall apply to the sale of fungible things, made independently and for a single price, or without contract of sale which the parties may enter into upon the consummation of the option.
consideration of their weight, number, or measure.
Requisites: Onerous, consensual, unilateral, subject matter is option to purchase
Should fungible things be sold for a price fixed according to weight, number, or measure, the risk shall not be Obligations on the part of the offeror:
imputed to the vendee until they have been weighed, counted, or measured and delivered, unless the latter has (a) personal obligation not to offer to any third party the sale of the object of the option
incurred in delay. during the option period;
(b) personal obligation not to withdraw the offer or option during option period
Art. 1481. In the contract of sale of goods by description or by sample, the contract may be rescinded if the bulk of (c) obligation to hold the subject matter for sale to the offeree in the event that offeree
the goods delivered do not correspond with the description or the sample, and if the contract be by sample as well exercises his option during the option period.
 Elements of Valid Option Contract
 been intended to be part of the consideration for the main contract with a right of withdrawal on the
part of the optionee, the main contract could be deemed perfected; a similar instance would be an
(a) CONSENT or the meeting of the minds upon: 
 “earnest money” in sale that can evidence its perfection.
(b) SUBJECT MATTER: an option right to an unaccepted unilateral offer to sell/accepted promise to
Ang Yu Asuncion would hold therefore that in an option contract, the granting of a consideration separate
sell, or unaccepted unilateral offer to buy/accepted promise to buy: 

and distinct from the purchase price of the intended sale, does not guarantee to the optionee that he has
(i) a determinate or determinable object; the absolute right to exercise the option, anytime during the option period. The separate consideration
(ii) for a price certain, including the manner of payment thereof; merely guarantees that within the option period, before the optioner breaches his obligation and
(c) PRESTATION: A consideration separate and distinct from the purchase price for the option given. withdraws the offer, an acceptance by the optionee would give rise to a valid and binding sale; and that
an acceptance within the option period after the optioner shall have unlawfully withdrawn the offer
Art. 1324. When the offerer has allowed the offeree a certain period to accept, the offer may would not give rise to a sale.
be withdrawn at any time before acceptance by communicating such withdrawal, except The better rule would be that in case an option is supported by a separate consideration, the optionee
when the option is founded upon a consideration, as something paid or promised. shall have the right to exercise the option or accept the offer at anytime during the option period and the same
would give rise to a valid and binding contract of sale. In the same manner, if separate consideration has been
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally received by the optioner for the grant of the option, he cannot withdraw the offer during the option
demandable. period, and any attempt to so withdraw the offer during the option period shall be void.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promissor if the promise is supported by a consideration distinct from the 2. Right of First Refusal
price. A right of first refusal cannot be the subject of specific performance, but breach would allow a recovery
of damages.
a. Meaning of “separate consideration” In a right of first refusal, while the object might be made determinate, the exercise of the right would be
The separate consideration in an option may be anything of value, unlike in sale where it dependent not only on the grantor’s eventual intention to enter into a binding juridical relation with
must be the price certain in money or its equivalent. another but also on terms, including the price, that are yet to be firmed up. The offer may be withdrawn
anytime by communicating the withdrawal to the other party.
b. No separate consideration, void as option, valid as offer There need not be a separate consideration in a right of first refusal since such stipulation is part and
Without a consideration separate from the purchase price, an option contract would be void, parcel of the entire con- tract of lease to which it may be attached to; the consideration for the lease
as a contract, but would still constitute a valid offer; so that if the option is exercised prior to its includes the consideration for the right of first refusal.
withdrawal, that is equivalent to an offer being accepted prior to withdrawal and would give The ordinary language of a right of first refusal clause simply means that should the lessor-promissor
rise to a valid and binding sale. Such can only apply if the option has been accepted and such decide to sell the leased property during the term of the lease, such sale should first be offered to the
acceptance is communicated to the offeror. lessee; and the series of negotiations that transpire between the lessor and the lessee on the basis of such
preference is deemed a compliance of such clause even when no final purchase agreement is perfected
c. There must be acceptance of option offer between the parties. The lessor would then be at liberty to offer the sale to a third party who paid a
higher price, and there is no violation of the right of the lessee.
d. Proper exercise of option contract Only after the lessee grantee fails to exercise its rights under the same terms and within the period
The acceptance or exercise of the option must still be made within the option period to give contemplated can the owner validly offer to sell the property to a third person, again under the same terms
rise to a valid and binding sale, and it is only then that the principle of substantial compliance as offered to the grantee.
would have relevance.

Summary Rules When Period Is Granted to Promisee 3. Mutual Promise to Buy and Sell
Ang Yu Asuncion v. Court of Appeals,76 summarized the applicable rules where a period is given to the offeree within The promise to sell a determinate thing coupled with a correlative promise to buy at a specified price is
which to accept the offer, i.e., the option, thus: binding as an executory agreement.106 Even in this case the certainty of the price must also exist,
(a) If the period itself is not founded upon or supported by a separate consideration, the offeror is still otherwise, there is no valid and enforceable contract to sell.
free and has the right to withdraw the offer before its acceptance, or, if an acceptance has been made,
before the offeror’s coming to know of such fact, by communicating that withdrawal to the offeree. An unconditional mutual promise to buy and sell, as long as the object is made determinate and the price
(This is in accordance with the Sanchez doctrine.) 
 is fixed, can be obligatory on the parties, and compliance therewith may accordingly be exacted,”108
(b) The right to withdraw, however, must not be exercised whimsically or arbitrarily; other- wise, it could which means that an action for specific performance is available. The ruling covers a form of “contract
give rise to a damage claim under Article 19 of the Civil Code which ordains that “every person must, in to sell” that are within the perfection stage of sales defined by Article 1458 for they embody the main
the exercise of his right and in the performance of his duties, act with justice, give everyone his due, and obligation of the seller “to transfer ownership and delivery possession” of the subject matter upon
observe honesty and good faith.” fulfillment of the condition that buyer pays the purchase price.
(c) If the period has a separate consideration, a contract of “option” is deemed perfected, and it would be
a breach of that contract to withdraw the offer during the agreed period. Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
(d) The option, however, is an independent contract by itself, and it is to be distinguished from the An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon
projected main agreement which is obviously yet to be concluded. If, in fact, the optioner-offeror the promissor.
withdraws the offer before its acceptance by the optionee-offeree, the latter may not sue for specific performance on
the proposed contract since it has failed to reach its own stage of perfection. The optioner-offeror, B. Perfection Stage
however, renders himself liable for damages for breach of the option. Sale is at once perfected when a person (the seller) obligates himself for a price certain, to deliver and to transfer
(e) In these cases, care should be taken of the real nature of the consideration given, for if in fact, it has ownership of a specified thing or right to another (the buyer) over which the latter agrees.”
Consent may be vitiated by any of the following: mistake, violence, intimidation, undue influence and fraud, but they 4. Earnest Money
do not make the contract void ab initio but only voidable, and the contract is binding upon the parties unless annulled Art. 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the
by proper court action. price and as proof of the perfection of the contract.

1. Absolute Acceptance of a Certain Offer 5. Difference between Earnest Money and Option Money
An offer is “certain” only where there is an offer to sell or an offer to buy a subject matter and for a (a) Earnest money is part of the purchase price, while option money is the money given as a distinct
price having all the seven essential requisites mandated by law for subject matter and price. consideration for an option contract; 

(b) Earnest money is given only where there is already a sale, while option money applies to a sale not
The acceptance must be identical in all respects with that of the offer so as to produce consent or meeting
of minds. yet perfected; and 

(c) When earnest money is given, the buyer is bound to pay the balance, while when the would-be buyer
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing gives option money, he is not required to buy, but may even forfeit it depending on the terms of the
which is the object of the contract and upon the price.
option.1 

From that moment, the parties may reciprocally demand performance, subject to the provisions of the
law governing the form of contracts.
6. Sale Deemed Perfected where Offer was Made
2. When “Deviation” Allowed Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the
The changes were not substantial, but merely clarificatory. cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A
qualified acceptance constitutes a counter-offer.
3. Sale by Auction
A sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer, Acceptance made by letter or telegram does not bind the offerer except from the time it came to his
or in other customary manner. knowledge. The contract, in such a case, is presumed to have been entered into in the place where the
offer was made.
Art. 1476. In the case of a sale by auction:
(1) Where goods are put up for sale by auction in lots, each lot is the subject of a separate C. Formal Requirements of Sale
contract of sale. Art. 1357. If the law requires a document or other special form, as in the acts and contracts enumerated in the
(2) A sale by auction is perfected when the auctioneer announces its perfection by the fall of following article, the contracting parties may compel each other to observe that form, once the contract has been
the hammer, or in other customary manner. Until such announcement is made, any bidder perfected. This right may be exercised simultaneously with the action upon the contract.
may retract his bid; and the auctioneer may withdraw the goods from the sale unless the
auction has been announced to be without reserve. Art. 1358. The following must appear in a public document:
(3) A right to bid may be reserved expressly by or on behalf of the seller, unless otherwise (1) Acts and contracts which have for their object the creation, transmission, modification or
provided by law or by stipulation. extinguishment of real rights over immovable property; sales of real property or of an interest therein a
(4) Where notice has not been given that a sale by auction is subject to a right to bid on governed by Articles 1403, No. 2, and 1405;
behalf of the seller, it shall not be lawful for the seller to bid himself or to employ or induce (2) The cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership
any person to bid at such sale on his behalf or for the auctioneer, to employ or induce any of gains;
person to bid at such sale on behalf of the seller or knowingly to take any bid from the seller (3) The power to administer property, or any other power which has for its object an act appearing or
or any person employed by him. Any sale contravening this rule may be treated as fraudulent which should appear in a public document, or should prejudice a third person;
by the buyer. (4) The cession of actions or rights proceeding from an act appearing in a public document.
All other contracts where the amount involved exceeds five hundred pesos must appear in writing, even a private
Art. 1403. The following contracts are unenforceable, unless they are ratified: one. But sales of goods, chattels or things in action are governed by Articles, 1403, No. 2 and 1405.

(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the Art. 1406. When a contract is enforceable under the Statute of Frauds, and a public document is necessary for its
following cases an agreement hereafter made shall be unenforceable by action, unless the registration in the Registry of Deeds, the parties may avail themselves of the right under Article 1357.
same, or some note or memorandum, thereof, be in writing, and subscribed by the party
charged, or by his agent; evidence, therefore, of the agreement cannot be received without Art. 1483. Subject to the provisions of the Statute of Frauds and of any other applicable statute, a contract of sale
the writing, or a secondary evidence of its contents: may be made in writing, or by word of mouth, or partly in writing and partly by word of mouth, or may be inferred
(d) An agreement for the sale of goods, chattels or things in action, at a price not from the conduct of the parties.
less than five hundred pesos, unless the buyer accept and receive part of such
goods and chattels, or the evidences, or some of them, of such things in action 1. Form Not Important for Validity of Sale
or pay at the time some part of the purchase money; but when a sale is made by Formalities intended for greater efficacy or convenience or to bind third persons, if not done, would not
auction and entry is made by the auctioneer in his sales book, at the time of the adversely affect the validity or enforceability of the contract between the contracting parties themselves.
sale, of the amount and kind of property sold, terms of sale, price, names of the
purchasers and person on whose account the sale is made, it is a sufficient a. Other Ruling on Deed of Sale
memorandum; The deed of sale operates as a formal or symbolic delivery of the property sold and authorizes
the buyer to use the document as proof of ownership.
Art. 1326. Advertisements for bidders are simply invitations to make proposals, and the advertiser is not
bound to accept the highest or lowest bidder, unless the contrary appears. b. Value of Business Forms to Prove Sale
2. When Form Important in Sale Electronic Commerce Act Section 7 provides that electronic documents shall
When Form of Sale Affects Its Validity have the legal effect, validity or enforceability as any other document or legal
The general rule therefore is that form is not important for the validity of a sale, except in the following writing:
instances: (a) Where the law requires a document to be in writing, that requirement is met
(a) The power to sell a piece of land or interest therein must be in writing, otherwise, the sale thereof by by an electronic document if the said electronic document maintains its integrity
the agent (even when the sale itself is in writing) would be void;1 and reliability and can be authenticated so as to be usable for subsequent
(b) Sale of large cattle must be in writing, otherwise the sale would be void; and no sale of large cattle reference, in that —
shall be valid unless the sale is registered with the municipal treasurer who shall issue a certificate of (i) The electronic document has remained complete and unaltered,
transfer;195 and apart from the addition of any endorsement and any authorized
(c) Sale of land by “non-muslim hill tribe cultural minorities all throughout the Philippines” is void if not change, or any change which arises in the normal course of
approved by the National Com- mission on Indigenous Peoples (NCIP),196 which took over the communication, storage and display; and 

previous requisite of approval by the Provincial Governor under Section 145 of Administrative Code of
(ii) The electronic document is reliable in the light of the purpose for
Mindanao and Sulu.
which it was generated and in the light of all relevant circumstances.
a. To Bind Third Persons 

b. For Enforceability between the Parties: Statute of Frauds (b) Paragraph (a) applies whether the require- ment therein is in the form of an obligation or
Art. 1403. The following contracts are unenforceable, unless they are ratified: whether the law simply provides conse- quences for the document not being pre- sented or
(1) Those entered into in the name of another person by one who has been given retained in its original form.
no authority or legal representation, or who has acted beyond his powers; (c) Where the law requires that a document be presented or retained in its original form, that
(2) Those that do not comply with the Statute of Frauds as set forth in this requirement is met by an electronic document if
number. In the following cases an agreement hereafter made shall be (i) There exists a reliable assurance as to the integrity of the
unenforceable by action, unless the same, or some note or memorandum, document from the time when it was first generated in its final form;
thereof, be in writing, and subscribed by the party charged, or by his agent;
and 

evidence, therefore, of the agreement cannot be received without the writing, or
a secondary evidence of its contents: (ii) That document is capable of being displayed to the person to
(a) An agreement that by its terms is not to be performed within a whom it is to be presented. 

year from the making thereof;
(b) A special promise to answer for the debt, default, or miscarriage 3. Partial Execution
of another; Art. 1405. Contracts infringing the Statute of Frauds, referred to in
(c) An agreement made in consideration of marriage, other than a No. 2 of Article 1403, are ratified by the failure to object to the
mutual promise to marry; presentation of oral evidence to prove the same, or by the acceptance
(d) An agreement for the sale of goods, chattels or things in action, of benefit under them.
at a price not less than five hundred pesos, unless the buyer accept
and receive part of such goods and chattels, or the evidences, or some 4. Waiver
of them, of such things in action or pay at the time some part of the
purchase money; but when a sale is made by auction and entry is 5. Rulings on Receipts and Other Documentary Evidence of Sale
made by the auctioneer in his sales book, at the time of the sale, of
the amount and kind of property sold, terms of sale, price, names of b. For Validity: Sale of Realty through Agent, Authority Must be in Writing
the purchasers and person on whose account the sale is made, it is a Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the
sufficient memorandum; authority of the latter shall be in writing; otherwise, the sale shall be void.
(e) An agreement of the leasing for a longer period than one year, or
for the sale of real property or of an interest therein; c. Sale of Large Cattle
(f) A representation as to the credit of a third person.
(3) Those where both parties are incapable of giving consent to a contract. D. Simulated Sales
When a sale is absolutely simulated, then it is completely void and non-existent.
Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of Article 1403, Requisites for simulation are:
are ratified by the failure to object to the presentation of oral evidence to prove the same, or (a) An outward declaration of will different from the will of the parties;
by the acceptance of benefit under them. (b) The false appearance must have been intended by mutual agreement; and
(c) The purpose is to deceive third persons.
1. Coverage
a. Sale of Real Property 1. Badges and Non-badges of Simulation
b. Agency to Sell or Buy Non-payment of stipulated consideration
c. Rights of First Refusal
d. Equitable Mortgage 2. When Motive Nullifies the Sale
e. Right to Repurchase Illegal motive predetermined purpose of the contract.
2. Memorandum
Exception: Electronic Documents under the E-Commerce Act 3. Remedies Allowed when Sale Simulated
 When a contract of sale is void, the right to set up its nullity or non-existence is available to third persons
whose interests are directly affected thereby. Art. 1498. When the sale is made through a public instrument, the execution
thereof shall be equivalent to the delivery of the thing which is the object of the
4. Effect when Sale Declared Void contract, if from the deed the contrary does not appear or cannot clearly be
The action for the declaration of the contract’s nullity is imprescriptible—an action for reconveyance of inferred.
property on a void contract of sale does not prescribe. With regard to movable property, its delivery may also be made by the delivery
Possessor is entitled to keep the fruits during the period for which the buyer held the property in good of the keys of the place or depository where it is stored or kept.
faith.
Then restoration of what has been given is in order, since the relationship between parties in any contract 1) As to Movables
even if subsequently voided must always be characterized and punctuated by good faith and fair dealing. Art. 1498. When the sale is made through a public instrument, the execution
thereof shall be equivalent to the delivery of the thing which is the object of the
VI. CONSUMMATION AND PERFORMANCE OF CONTRACT OF SALE contract, if from the deed the contrary does not appear or cannot clearly be
inferred.
A. Obligations of Seller With regard to movable property, its delivery may also be made by the delivery
1. Preserve Subject Matter of the keys of the place or depository where it is stored or kept.
Art. 1163. Every person obliged to give something is also obliged to take care of it with the
proper diligence of a good father of a family, unless the law or the stipulation of the parties Art. 1499. The delivery of movable property may likewise be made by the mere
requires another standard of care. consent or agreement of the contracting parties, if the thing sold cannot be
transferred to the possession of the vendee at the time of the sale, or if the latter
2. Deliver with Fruits and Accessories already had it in his possession for any other reason.
Art. 1164. The creditor has a right to the fruits of the thing from the time the obligation to deliver it
arises. However, he shall acquire no real right over it until the same has been delivered to him. Art. 1513. A person to whom a negotiable document of title has been duly
negotiated acquires thereby:
Art. 1166. The obligation to give a determinate thing includes that of delivering all its accessions and (1) Such title to the goods as the person negotiating the document to
accessories, even though they may not have been mentioned. him had or had ability to convey to a purchaser in good faith for value
and also such title to the goods as the person to whose order the
Art. 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing goods were to be delivered by the terms of the document had or had
which is the object of the sale. ability to convey to a purchaser in good faith for value; and
(2) The direct obligation of the bailee issuing the document to hold
Art. 1537. The vendor is bound to deliver the thing sold and its accessions and accessories in the possession of the goods for him according to the terms of the
condition in which they were upon the perfection of the contract. document as fully as if such bailee had contracted directly with him.
All the fruits shall pertain to the vendee from the day on which the contract was perfected. Art. 1514. A person to whom a document of title has been transferred, but not
negotiated, acquires thereby, as against the transferor, the title to the goods,
3. Deliver the Subject Matter subject to the terms of any agreement with the transferor.
Art. 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or If the document is non-negotiable, such person also acquires the right to notify
constructive delivery thereof. the bailee who issued the document of the transfer thereof, and thereby to
acquire the direct obligation of such bailee to hold possession of the goods for
a. Legal Premises for Doctrines on Tradition him according to the terms of the document.
b. General Doctrines on Tradition, Whether Actual or Constructive Prior to the notification to such bailee by the transferor or transferee of a non-
Delivery contemplates ―the absolute giving up of the control and custody of the property negotiable document of title, the title of the transferee to the goods and the right
on the part of the vendor, and the assumption of the same by the vendee. Non nudis pactis sed to acquire the obligation of such bailee may be defeated by the levy of an
traditione dominia rerum transferantur. And there is said to be delivery if and when the thing sold attachment of execution upon the goods by a creditor of the transferor, or by a
―is placed in the control and possession of the vendee. notification to such bailee by the transferor or a subsequent purchaser from the
Concurrent transfer of two things: (1) possession and (2) ownership. transfer of a subsequent sale of the goods by the transferor.

c. Physical Delivery 2) As to Immovables

It is not necessary that seller himself delivers title to the buyer because the thing sold is In case of immovables, when sale is made through a public instrument, the
understood as delivered when it is placed in control and possession of buyer. execution thereof shall be equivalent to the delivery of the thing which is the
Art. 1497. The thing sold shall be understood as delivered, when it is placed in object of the contract, if from the deed the contrary does not appear or cannot
the control and possession of the vendee. clearly be inferred and that prior physical delivery or possession is not legally
required since execution of the deed is deemed equivalent to delivery. Provided
d. Constructive Delivery: Execution of a Public Instrument That:
As a general rule, when the sale is made through a public instrument, the execution thereof shall be (a) The thing sold is subject to the control of the seller; and
equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary (b) Such control should remain within a reasonable period after the
does not appear or cannot clearly be inferred. In order the execution of a public instrument to effect execution of the instrument
tradition, the purchaser must be placed in control of the thing sold. A person who does not have actual EXCEPT: When buyer assumes the risks of ownership and possession.
possession of the thing sold cannot transfer constructive possession by the execution and delivery of a
public instrument.
 Art. 1498. When the sale is made through a public instrument, the execution The right of possession or ownership may be thus reserved notwithstanding the delivery of the goods to
thereof shall be equivalent to the delivery of the thing which is the object of the the buyer or to a carrier or other bailee for the purpose of transmission to the buyer.
contract, if from the deed the contrary does not appear or cannot clearly be
inferred. Where goods are shipped, and by the bill of lading the goods are deliverable to the seller or his agent, or
With regard to movable property, its delivery may also be made by the delivery to the order of the seller or of his agent, the seller thereby reserves the ownership in the goods. But, if
of the keys of the place or depository where it is stored or kept. except for the form of the bill of lading, the ownership would have passed to the buyer on shipment of
the goods, the seller's property in the goods shall be deemed to be only for the purpose of securing
a) Registration of Title is Separate Mode from Execution of Public performance by the buyer of his obligations under the contract.
Instrument
The recording of the sale with the proper Registry of Deeds and the transfer of Where goods are shipped, and by the bill of lading the goods are deliverable to order of the buyer or of his agent,
the certificate of title in the name of the buyer are necessary only to bind third but possession of the bill of lading is retained by the seller or his agent, the seller thereby reserves a right to the
parties to the transfer of ownership. As between the seller and the buyer, the possession of the goods as against the buyer.
transfer of ownership takes effect upon the execution of a public instrument
conveying the real estate. Where the seller of goods draws on the buyer for the price and transmits the bill of exchange and bill of lading
together to the buyer to secure acceptance or payment of the bill of exchange, the buyer is bound to return the bill
b) Customary Steps in Selling Immovables of lading if he does not honor the bill of exchange, and if he wrongfully retains the bill of lading he acquires no
In the absence of a contrary agreement, the submission by an individual seller to added right thereby. If, however, the bill of lading provides that the goods are deliverable to the buyer or to the
the buyer of the following papers would complete a sale of real estate: (1) owner’s order of the buyer, or is indorsed in blank, or to the buyer by the consignee named therein, one who purchases in
duplicate copy of the Torrens title; (2) signed deed of absolute sale; (3) tax good faith, for value, the bill of lading, or goods from the buyer will obtain the ownership in the goods, although
declaration; and (4) latest realty tax receipt. the bill of exchange has not been honored, provided that such purchaser has received delivery of the bill of lading
indorsed by the consignee named therein, or of the goods, without notice of the facts making the transfer wrongful.
c) As to Incorporeal Property
In the sale of shares of stock, physical delivery of a stock certificate is one of the 5. Taking-out Insurance Coverage
essential requisites for the transfer of ownership of the stocks purchased. Art. 1523. Where, in pursuance of a contract of sale, the seller is authorized or required to send the goods to the
buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the
Art. 1501. With respect to incorporeal property, the provisions of the first buyer is deemed to be a delivery of the goods to the buyer, except in the case provided for in Article 1503, first,
paragraph of article 1498 shall govern. In any other case wherein said provisions second and third paragraphs, or unless a contrary intent appears.
are not applicable, the placing of the titles of ownership in the possession of the Unless otherwise authorized by the buyer, the seller must make such contract with the carrier on behalf of the buyer
vendee or the use by the vendee of his rights, with the vendor's consent, shall be as may be reasonable, having regard to the nature of the goods and the other circumstances of the case. If the seller
understood as a delivery. omit so to do, and the goods are lost or damaged in course of transit, the buyer may decline to treat the delivery to
the carrier as a delivery to himself, or may hold the seller responsible in damages.
e. Constitutum Possessorium Unless otherwise agreed, where goods are sent by the seller to the buyer under circumstances in which the seller
Art. 1500. There may also be tradition constitutum possessorium. knows or ought to know that it is usual to insure, the seller must give such notice to the buyer as may enable him to
insure them during their transit, and, if the seller fails to do so, the goods shall be deemed to be at his risk during
f. Tradition Brevi Manu such transit.

4. Transfer Ownership to Vendee Upon Delivery 6. Time and Place of Delivery

Art. 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery Art. 1521. Whether it is for the buyer to take possession of the goods or of the seller to send them to the buyer is a
thereof. question depending in each case on the contract, express or implied, between the parties. Apart from any such
contract, express or implied, or usage of trade to the contrary, the place of delivery is the seller's place of business if
Art. 1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid he has one, and if not his residence; but in case of a contract of sale of specific goods, which to the knowledge of
the price. the parties when the contract or the sale was made were in some other place, then that place is the place of delivery.

Art. 1496. The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any Where by a contract of sale the seller is bound to send the goods to the buyer, but no time for sending them is fixed,
of the ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement that the possession the seller is bound to send them within a reasonable time.
is transferred from the vendor to the vendee.
Where the goods at the time of sale are in the possession of a third person, the seller has not fulfilled his obligation
a. When Buyer Refuses to Accept to deliver to the buyer unless and until such third person acknowledges to the buyer that he holds the goods on the
Art. 1588. If there is no stipulation as specified in the first paragraph of article 1523, when the buyer's buyer's behalf.
refusal to accept the goods is without just cause, the title thereto passes to him from the moment they
are placed at his disposal. Demand or tender of delivery may be treated as ineffectual unless made at a reasonable hour. What is a reasonable
hour is a question of fact.
b. In Case of Express or Implied Reservation
Art. 1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he Unless otherwise agreed, the expenses of and incidental to putting the goods into a deliverable state must be borne
has fully paid the price. by the seller.

Art. 1503. When there is a contract of sale of specific goods, the seller may, by the terms of the contract, 7. Expenses of Execution and Registration and of Putting Goods in Deliverable Estate
reserve the right of possession or ownership in the goods until certain conditions have been fulfilled.
Art. 1487. The expenses for the execution and registration of the sale shall be borne by the vendor, unless there is a the ownership in the seller by returning or tendering the goods within the time fixed in the contract, or,
stipulation to the contrary. if no time has been fixed, within a reasonable time.
When goods are delivered to the buyer on approval or on trial or on satisfaction, or other similar terms,
B. Special Rules on Completeness of Delivery the ownership therein passes to the buyer:
1. In case of Movables (1) When he signifies his approval or acceptance to the seller or does any other act adopting
Art. 1522. Where the seller delivers to the buyer a quantity of goods less than he contracted the transaction;
to sell, the buyer may reject them, but if the buyer accepts or retains the goods so delivered, (2) If he does not signify his approval or acceptance to the seller, but retains the goods
knowing that the seller is not going to perform the contract in full, he must pay for them at without giving notice of rejection, then if a time has been fixed for the return of the goods,
the contract rate. If, however, the buyer has used or disposed of the goods delivered before on the expiration of such time, and, if no time has been fixed, on the expiration of a
he knows that the seller is not going to perform his contract in full, the buyer shall not be reasonable time. What is a reasonable time is a question of fact.
liable for more than the fair value to him of the goods so received.
Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell, c. Sale by Description and/or Sample
the buyer may accept the goods included in the contract and reject the rest. If the buyer Art. 1481. In the contract of sale of goods by description or by sample, the contract may be
accepts the whole of the goods so delivered he must pay for them at the contract rate. rescinded if the bulk of the goods delivered do not correspond with the description or the
Where the seller delivers to the buyer the goods he contracted to sell mixed with goods of a sample, and if the contract be by sample as well as description, it is not sufficient that the
different description not included in the contract, the buyer may accept the goods which are bulk of goods correspond with the sample if they do not also correspond with the
in accordance with the contract and reject the rest. description.
In the preceding two paragraphs, if the subject matter is indivisible, the buyer may reject the The buyer shall have a reasonable opportunity of comparing the bulk with the description or
whole of the goods. the sample.
The provisions of this article are subject to any usage of trade, special agreement, or course
of dealing between the parties. d. Buyer’s Right to Inspect before Acceptance Except when Carrier delivers COD.
Art. 1584. Where goods are delivered to the buyer, which he has not previously examined,
Art. 1537. The vendor is bound to deliver the thing sold and its accessions and accessories in the he is not deemed to have accepted them unless and until he has had a reasonable opportunity
condition in which they were upon the perfection of the contract. of examining them for the purpose of ascertaining whether they are in conformity with the
All the fruits shall pertain to the vendee from the day on which the contract was perfected. contract if there is no stipulation to the contrary.
Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound,
Art. 1480. Any injury to or benefit from the thing sold, after the contract has been perfected, from the on request, to afford the buyer a reasonable opportunity of examining the goods for the
moment of the perfection of the contract to the time of delivery, shall be governed by Articles 1163 to purpose of ascertaining whether they are in conformity with the contract.
1165, and 1262. Where goods are delivered to a carrier by the seller, in accordance with an order from or
This rule shall apply to the sale of fungible things, made independently and for a single price, or without agreement with the buyer, upon the terms that the goods shall not be delivered by the carrier
consideration of their weight, number, or measure. to the buyer until he has paid the price, whether such terms are indicated by marking the
Should fungible things be sold for a price fixed according to weight, number, or measure, the risk shall goods with the words "collect on delivery," or otherwise, the buyer is not entitled to examine
not be imputed to the vendee until they have been weighed, counted, or measured and delivered, unless the goods before the payment of the price, in the absence of agreement or usage of trade
the latter has incurred in delay. permitting such examination.

a. Rules on Delivery to Carrier 2. In Case of Immovables

Art. 1523. Where, in pursuance of a contract of sale, the seller is authorized or required to send the goods a. Where Sold per Unit or Number
to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of Art. 1539. The obligation to deliver the thing sold includes that of placing in the control of the vendee
transmission to the buyer is deemed to be a delivery of the goods to the buyer, except in the case provided all that is mentioned in the contract, in conformity with the following rules:
for in Article 1503, first, second and third paragraphs, or unless a contrary intent appears. If the sale of real estate should be made with a statement of its area, at the rate of a certain price for a
Unless otherwise authorized by the buyer, the seller must make such contract with the carrier on behalf unit of measure or number, the vendor shall be obliged to deliver to the vendee, if the latter should
of the buyer as may be reasonable, having regard to the nature of the goods and the other circumstances demand it, all that may have been stated in the contract; but, should this be not possible, the vendee may
of the case. If the seller omit so to do, and the goods are lost or damaged in course of transit, the buyer choose between a proportional reduction of the price and the rescission of the contract, provided that,
may decline to treat the delivery to the carrier as a delivery to himself, or may hold the seller responsible in the latter case, the lack in the area be not less than one-tenth of that stated.
in damages. The same shall be done, even when the area is the same, if any part of the immovable is not of the quality
Unless otherwise agreed, where goods are sent by the seller to the buyer under circumstances in which specified in the contract.
the seller knows or ought to know that it is usual to insure, the seller must give such notice to the buyer The rescission, in this case, shall only take place at the will of the vendee, when the inferior value of the
as may enable him to insure them during their transit, and, if the seller fails to do so, the goods shall be thing sold exceeds one-tenth of the price agreed upon.
deemed to be at his risk during such transit. Nevertheless, if the vendee would not have bought the immovable had he known of its smaller area of
inferior quality, he may rescind the sale.
1. FAS Sales
2. FOB Saels Art. 1540. If, in the case of the preceding article, there is a greater area or number in the immovable than
3. CIF Sales that stated in the contract, the vendee may accept the area included in the contract and reject the rest. If
he accepts the whole area, he must pay for the same at the contract rate.
b. Sale on Approval, Trial or Satisfaction
Art. 1502. When goods are delivered to the buyer "on sale or return" to give the buyer an option to return
the goods instead of paying the price, the ownership passes to the buyer of delivery, but he may revest b. Where Sold for a Lump Sum
Art. 1542. In the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit
of measure or number, there shall be no increase or decrease of the price, although there be a greater or
less area or number than that stated in the contract.
The same rule shall be applied when two or more immovables as sold for a single price; but if, besides
mentioning the boundaries, which is indispensable in every conveyance of real estate, its area or number
should be designated in the contract, the vendor shall be bound to deliver all that is included within said
boundaries, even when it exceeds the area or number specified in the contract; and, should he not be
able to do so, he shall suffer a reduction in the price, in proportion to what is lacking in the area or
number, unless the contract is rescinded because the vendee does not accede to the failure to deliver
what has been stipulated.